Treasuries fall as unemployment rate drops below eight percent, stock rally fades

October 5th, 2012 by

(Bond Market Wrapup for October 5th, 2012) – Treasury bonds fell to the lowest level in two weeks after an unexpected drop in US unemployment rate fuelled concerns the Fed’s monetary policy will spur inflation. A Bureau of Labor Statistics report said unemployment rate dropped to 7.8 percent in September, the lowest since President Obama took office in January 2009. The economy added 114,000 employees last month after adding 142,000 workers in August. A detailed monthly analysis showed hourly earnings rose 0.3 percent for the month.

The yield on the benchmark 10-year Treasury notes rose five basis points, or 0.05 percentage point, to 1.73 percent. Yield on the 30-year Treasury bond rose seven basis points, or 0.07 percentage point, to 2.96 percent

Bond funds tanked with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shed $1.59, or 1.30 percent, to settle at $121.15 while the Vanguard Total Bond Market ETF (BND) lost 9 cents, or 0.11 percent to finish at $84.78.

US stocks closed mixed Friday despite a better-than-expected report on the US jobs market. All the major gauges however, advanced about one percent for the week though a cloudy outlook on global economy continued to weigh on the markets.

The Dow Jones Industrial Average (DJIA) rallied 34.79 points, or 0.3 percent, to finish at 13,610.15, up 1.3 percent over last Friday. Within the 30-stock blue-chip index, gainers outpaced decliners 20 to 10, led by Home Depot (HD), Intel (INTC) and Boeing (BA).

Posting its highest close since December 2007, the DJIA is up 11.4 percent so far this year in 2012.

The S&P 500 Index (SPX) lost 0.47 points, or 0.03 percent, to end at 1460.90, still up 1.4 percent for the week. The index has added 16.2 percent year to date.

The tech-heavy NASDAQ Composite Index (COMP) was hit the hardest, losing 13.27 points, or 0.4 percent, to close at 3136.19, still up 0.6 percent for the week and 20.4 percent for the year. The index’s biggest component Apple (AAPL) tumbled 2.1 percent, registering its seventh loss day in the past 10 sessions.

Advancers outpaced decliners 17 to 13 on the NYSE.

Oil prices for November delivery dropped $1.83 to close at $89.88 a barrel.

Gold futures for December delivery slipped $15.70 to $1,780.80 an ounce.

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